SB to self-insure itself for workers’ compensation

SOLANA BEACH -- A city determined to slash skyrocketing workers’compensation costs has dumped its old provider and will employ abrand-new one -- itself.

By a unanimous vote last week, the Solana Beach City Councilordered its staff to launch a self-insurance program for the city’s65 employees effective Oct. 1.

On that date, the city will cancel its coverage with theCalifornia State Compensation Insurance Fund, which has providedthe mandated coverage to city workers since Solana Beachincorporated in 1986.

Public and private employers across California are reeling fromincreases in the cost of workers’ comp insurance, which covers thetreatment of employees who are hurt on the job.

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Oceanside, Escondido, San Marcos, Carlsbad and Encinitas areamong the cities that have switched to self-insurance in attemptsto control workers’ compensation costs. Meanwhile, the fracturedworkers’ comp system is driving jobs out of California andlawmakers are scrambling to enact reforms.

Its quoted premium for fiscal year 2003-04, which started July1, was $688,120, according to a city report. That’s a 175 percentincrease from the 2002-03 premium of $325,000 and a 344 percentincrease from that of 2000-01, when the city paid $156,000 forworkers’ comp insurance.

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As a self-insured city, Solana Beach can realize a $229,000savings, the report says.

To do that, the city has placed $500,000 into a newlyestablished workers’ compensation fund. It also has joined arisk-sharing consortium, the California Public Entity InsuranceAuthority, that will cover claims which exceed $125,000.

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A sorry state

The troubled workers’ comp program is buckling under claimsexpected to total $29 billion this year.

This session, the Legislature has drafted some 50 bills to dealwith the crisis, said Rich Stevens, a state Department ofIndustrial Relations spokesman.

“It’s the biggest issue in Sacramento right now,” he said.

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A joint legislative committee is expected to bring forthproposals by Tuesday to bandage the bleeding system, Stevenssaid.

The committee is examining ways to cap visits to doctors,chiropractors and physical therapists. Fee-for-service care, whichbrings profits to providers the more they treat their patients,also is under the microscope. So are the rates charged bydrug-makers.

Since 2000, increases in medical-care costs have driven premiumrates higher and higher. Self-insured costs, like those SolanaBeach now faces, have followed suit. The net result is employers’workers’ comp costs are at an all-time high.

National factors, such as escalating medical malpracticeinsurance rates and the insurance industry’s not-yet-full recoveryfrom the Sept. 11 attacks, have further strained California’sworkers’ comp system.

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Still another factor leading to the crisis can be traced to themid-1990s, when California deregulated its workers’ compsystem.